Investors have piled into dividend stocks, but Spears says despite the renewed interest, there’s been little change in how Tweedy Browne looks at companies to buy. “We like to look at businesses as if we owned the whole company,” he says, adding, “That’s nothing abnormal from what we’ve done for the past 30 years. We sell when the yield goes down and the price goes up.”
Dividend stocks were beat up a bit recently over worries about whether the Federal Reserve would taper its $85 billion bond-buying program, known as quantitative easing. Cohen says he’s not too concerned.
“I like to listen to [Fed Chairman Ben Bernanke]. He tells you what to expect,” Cohen says.
Cohen and Spears spoke glowingly of the Fed and other central banks. Commenting on Fed actions after the 2008 credit crisis, Cohen says, “Bernanke saved the world.” Spears also piped in: “God bless the central banks and deposit insurance.”
Central bank actions have had a slightly different impact on Asian equities, Madsen says. His Asia-focused funds would likely pay a little more attention to Fed actions because of the effect on currency markets. One side effect the rising U.S. dollar has had on that area of focus is that “no one is talking currency wars anymore,” he says.
Madsen says he watches the actions of Japanese Prime Minister Shinzo Abe, who is determined to pull Japan out of its 30-year recession. In addition to monetary and fiscal policy, structural change is needed in Japan, Madsen says, which is much more difficult. Yet he says it’s not inconceivable.
“In Japan’s history, twice in the past 150 years they’ve accepted severe upheaval in their society. Let’s see if it happens again,” Madsen says.
Cohen says while dividend stocks might have been knocked around a bit, people need to keep perspective and think long term. “When people focus on price [and it falls], they lose sight that their income can double in less than nine years. No one gets raises like that,” he says.
There’s a chance, he says, that dividends could continue to grow to a point similar to the late 1960s: “If you worry about stocks being extended, you may never get to see the most beautiful thing to behold—when the dividend is more than the price of the stock.”